November 2017 Committee on School Finance Permanent School Fund Item 2

Proposed Amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract, §109.52, Uniform Depository Bank Contract and Surety Bond Forms
(First Reading and Filing Authorization)

November 10, 2017

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION

SUMMARY: This item presents for first reading and filing authorization a proposed amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract, §109.52, Uniform Depository Bank Contract and Surety Bond Forms. The proposed amendment would update the depository contract adopted in rule to reflect changes made by Senate Bill (SB) 754, 85th Texas Legislature, Regular Session, 2017.

STATUTORY AUTHORITY: Texas Education Code (TEC), §§7.102(c)(34); 45.205(b), as amended by SB 754, 85th Texas Legislature, Regular Session, 2017; 45.206; and 45.208.

TEC, §7.102(c)(34), requires the State Board of Education (SBOE) to prescribe uniform bid blanks for school districts to use in selecting a depository bank as required by the TEC, §45.206.

TEC, §45.205(b), as amended by SB 754, 85th Texas Legislature, Regular Session, 2017, provides the term for a contract between a school district and the district's depository bank.

TEC, §45.206, requires a school district to acquire a bank to be its depository by utilizing either a bid or proposal using the forms prescribed by the SBOE.

TEC, §45.208, requires that a school district use the depository contract prescribed by the SBOE; that the depository bank secure the highest daily amount of cash in the bank using a bond or other surety agreements; and that the contract, bid or proposal, and bond be filed with the agency.

EFFECTIVE DATE: The proposed effective date of the proposed amendment is 20 days after filing as adopted with the Texas Register. Under TEC, §7.102(f), the SBOE must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2018-2019 school year. The earlier effective date will allow schools districts to take advantage of the additional extension period and not be required to go through the depository contract procurement process, which will save taxpayer dollars. In addition, the earlier effective date will expedite the alignment of the rule with SB 754, which became effective September 1, 2017.

PREVIOUS BOARD ACTION: The SBOE adopted §109.52 effective September 1, 1997, and last amended it effective May 15, 2014. The proposed amendment was presented to the Committee on School Finance/Permanent School Fund for discussion at the September 2017 SBOE meeting.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: Section 109.52 establishes the requirement that each school district select at least one bank as a depository and enter into a depository contract with the bank, providing the completed contract to the Texas Education Agency (TEA). Section 109.52 also establishes the requirement that a district provide a completed surety bond form to the TEA if the depository bank uses a surety bond to secure district deposits. The section includes the depository contract form and surety bond form with the content prescribed by the SBOE.

SB 754, 85th Texas Legislature, Regular Session, 2017, amended the TEC, §45.205(b), to allow the school district depository contract to be extended a total of three two-year terms. In addition, the bill allows the depository contract to be modified for each two-year extension if both the school district and the district's depository bank mutually agree to the terms.

The proposed amendment to §109.52 would implement SB 754 by modifying Figure: 19 TAC §109.52(b) to allow a school district depository contract to be extended to the number of two-year terms allowed by the TEC, §45.205(b).

FISCAL IMPACT: The TEA has determined that that there are no additional costs to persons or entities required to comply with the proposed amendment. In addition, there is no direct adverse economic impact for small businesses, microbusinesses, and rural communities; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required. There is no effect on local economy for the first five years that the proposed amendment is in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022. The proposed amendment does not impose a cost on regulated persons and, therefore, is not subject to Texas Government Code, §2001.0045.

GOVERNMENT GROWTH IMPACT: In accordance with Texas Government Code, §2001.0221, TEA staff has determined that the proposed amendment would expand an existing regulation. The proposed regulation would add an additional two-year extension period for school districts to extend their current depository contracts. It also provides additional flexibility during the extension periods to allow for modification of the contract.

PUBLIC AND STUDENT BENEFIT: The proposed amendment would update the contract with a depository bank and provide additional flexibility in extension years.

PROCEDURAL AND REPORTING IMPLICATIONS: Section 109.52 requires school districts to submit to the TEA an executed depository contract. The proposed amendment would require school districts to submit to the TEA an extension form every two years (for a maximum of three extensions) communicating that they are still under the same depository contract.

LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendment would have no new locally maintained paperwork requirements.

PUBLIC COMMENTS: The public comment period will begin when the proposal, approved for first reading and filing authorization, is published in the Texas Register.

ALTERNATIVES: None.

OTHER COMMENTS AND RELATED ISSUES: A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register.

MOTION TO BE CONSIDERED: The State Board of Education:

Approve for first reading and filing authorization the proposed amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract, §109.52, Uniform Depository Bank Contract and Surety Bond Forms.

Staff Members Responsible:
Leo Lopez, Associate Commissioner
School Finance / Chief School Finance Officer

David Marx, Director
Financial Compliance

Attachments:
I. Statutory Citations (PDF, 25KB)
II. Text of Proposed Amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract, §109.52, Uniform Depository Bank Contract and Surety Bond Forms (PDF, 210KB)